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5 Year-End Planning Considerations for 2018

The end of the year is a great time to review the progress you’ve made toward your goals and take advantage of some planning opportunities. Below are five items to consider.

1. Taxes

2018 is the first year with the new tax laws from the Tax Cuts and Jobs Act, which requires a new approach to reviewing your tax situation. Here are some of the most commons issues to consider:

  • Itemizing vs. standard deduction. The most notable Schedule A changes are a limit on the ‘taxes you paid’ section to $10,000 and the ‘job expenses and certain miscellaneous deductions’ section has been removed. These changes are expected to make most Americans claim the standard deduction. The planning opportunity here is around how to make your gifts to charity. Consider “bunching” your giving using a donor advised fund or, if you are over age 70.5, take advantage of the Qualified Charitable Deduction for IRA distributions.
  • If you are in a low-income tax year consider a Roth IRA conversion to convert some or all of your IRA to your Roth. This strategy works best when the conversion uses a lower tax bracket than you expect to be in throughout retirement.
  • Check out our post on year-end tax moves to reduce your income taxes owed.

2. Portfolio Adjustments

  • If you have a taxable investment account you will want to do tax-loss harvesting on any capital losses.
  • Mutual funds will often distribute capital gains so pay attention to the date and amount of the distribution.
  • If you’re over 70.5 years old, make sure you take your required minimum distribution (RMD). You will also have a RMD, regardless of your age, if you are the owner of a beneficiary (inherited) IRA account.
  • Lastly, if you haven’t rebalanced your portfolio recently, this would be a good time to get back to your targets.

3. Excess Cash

  • The annual gift tax exclusion is $15,000. This can be gifted to as many individuals as you’d like each year.
  • Consider charitable donations.
  • Consider IRA contributions, if eligible.

4. Spending Plan

  • Take some time to review your spending plan and consider adjustments for next year.
  • If you have never used a spending plan, this is a great time to make one for next year.

5. Health Insurance

  • You may have received a letter from your insurer about changes to your policy which would require some action on your part. Even if you haven’t received such a letter, the end of the year is a good time to review your coverage and consider any adjustments that may be needed.

Information in this material is for general information only and not intended as investment, tax or legal advice. Please consult the appropriate professional for specific information regarding your individual situation prior to making any financial decision.

No strategy assures success or protects against loss. Investing involves risk including loss of principal.

Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs.

Traditional IRA account owners should consider the tax ramifications, age and income restrictions in regards to executing a conversion from a Traditional IRA to a Roth IRA. The converted amount is generally subject to income taxation.